If you have ever played poker with potato chips before I can bet you saw 5th street every time. It is not like you cared if you lost a potato chip now did you? Would you make the same decisions if you were playing with a few thousand dollars? I seriously doubt it since once you add a layer of emotion in any game, the game changes. So why do so many people practice in a demo account and expect to be successful traders regardless of the education they received beforehand?

2 – YOU DON’T KNOW YOUR “SELF”

I remember practicing a speech when I was in middle school in my room the night before a big presentation. I knew it cold, and was confident I would do great the next day. When that next day came I stood up to present and turned around and looked out at the classroom and saw everyone looking at me. I completely froze up and forgot all that I practiced on the night before. Fear grabbed ahold of me and I was scared out of my mind. I simply did not understand both the physical and mental environment I was getting into ahead of time. Sound familiar?

3 – YOU HAVE HAD NO OTHER CHOICE

Brokers will kindly ask you to practice on their demo accounts until you feel like you are ready – a complete numbers game. Good and bad educators alike will offer you a myriad of methodologies and teachings that never provide you with an environment to adequately feel what it is like to be substantially up or down in the market and still follow your rationale trading plan.

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20 Comments

A Demo account can be the best learning tool, but most of the times that potential is not fully realized. Paying attention to the 3 reasons outlined here by Mathew is the first step towards learning more about how to leverage a Demo account.

The only way to learn is to trade a real account !!
I did it by starting long time ago with a real
Oanda trading account and have never regretted it.
You learn money management skills and handling the
correct leverage. Greed to make big money in a short time is the biggest enemy in this business !!!
Who he isn’t aware of this rule No. 1 will be killed soon by Mr. Market !

Matthew, what’s wrong or dangerous is not the demo account, it is quite the opposite. The problem is not being able to trade with a trading plan and not taking your demo account seriously. There is no replacement for not trading with rules and demo accts are the most appropriate setting for learning. I encourage traders to have a demo 1 and demo 2 accounts, one for real-like trading following strict rules, and 2 for experimentation.

Personally I feel there is a lack of discipline and seriousness in using demo. After acquaintance for a few months I used live account trading micro lot as demo. It is painful but progress more effectively

This has been most probably, the dumbest article ever written. I started FX @ 5 yrs ago and traded demo for over a year. I forced myself to take every trade seriously. I sweat blood just like I did when I opened a mini account and also playing full contracts now. I presume to think your rendition is to “protect” newbies from themselves. That’s crap. If ppl don’t step into this arena focused and serious and causious….I will gladly take their cash. My respect is to my brothers and sisters I trade against who fight for their coin like I do. This forum is for deliberate, coordinated attack upon the market. If you aren’t ready for war, then get out!

I am definitely biased because I have chatted with Mathew about his project so I know where he is going with this post. I agree that traders should not call themselves that until they have experienced the market. A demo account is only a tool that can be beneficial if its used with discipline and the right frame of mind to capture the lessons learned.

I second your thoughts on expecting other traders to be ready for anything, and trust me Mathew is working on giving would be traders the tools needed to turn a Demo account into an integral part of their trading journey making sure the lessons stick and they can be welcomed into the brotherhood/sisterhood of forex traders.

I have traded for 5-6 years and still use a demo account extensively for testing a new strategy or back testing or understanding a new platforms order entry system….

For learning the platform, and forward/ back testing a strategy in real time there is no comparison!
It is crucial to understand the platform nuances/ position sizing etc etc
As well as seeing if you have an edge at all!!

What you are suggesting is that simulation is useless, why do pilots spend tons of hours in a simulator before flying a commercial plane or golfers spend thousands of hours at a driving range perfecting their swing?

The article above is a complete misnomer,
If you don’t take trading seriously demo or live and have a clear proven plan, you will hand your account to people who do… period.

Trading is a high performance activity, if you don’t believe you are competing directly with the world’s best you are deluding yourself

Thank you for the comment. I was not able to reply earlier as they shut down the comment section, but have since opened it back up.

As to your points – you are completely correct that demo’s can be very useful for position sizing, learning the GUI, back-testing, etc – however they are also quite dangerous in giving people a false sense of security in themselves once they have adequate skin in the game.

My purpose was to open up dialog in this as I believe there is a better way than the choices traders have now. I actually had another article that tied this all up but it was not published on this site (ill work on that so this all makes more sense).

Finally in referencing your example, consider this:

Why did Phil Mickelson choke in the 2006 US Open when he needed a bogey to win? He’s practiced all of those shots a million times? Why do golfers miss 1 foot putts for a win, or excellent free throw shooters miss 2 shots in a row to clinch a game? You get the rest… All of this has to do with emotions and learning how to deal with them when in counts.

Practicing your putts, free throws, or drives is technical but long term success is much more than that.

I would say use the demo but do not stay there for too long. As for emotions, it all depends on your psychology and frame of mind. Yes Mathews has a point but it is not enough to disregard demo accounts for those who are new at this and those who wants to modify their strategy. “Just do not stay for too long ”

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